High net worth investor and hedge fund manager Angus Tulloch noted that Sri Lanka had faced much greater macroeconomic stresses than was currently being faced.
Tulloch noted that Sri Lankan corporates were well versed in adversity and in his experience going back into the 1990s he has always had great faith in their managerial practices.
Tulloch noted that investors are now looking to buy up shares in the hopes that things settle and make large profits on the increasing values brought about by increased macro-economic stability.
Tulloch who was one of the forerunners in creating frontier market funds globally was one of the foreign experts on the CTCLSA webinar ‘In Search of a Silver Lining - The Sri Lankan Story’ held on 12 January.
Tulloch was of the view that Sri Lanka may benefit from engaging with the IMF and then using the IMF arrangement to free up the foreign exchange market.
Tulloch was weary of the global trend towards easy money that had created huge asset price bubbles globally. Tulloch was very happy with the honesty that was present in Sri Lanka’s corporates. Tulloch advocated for larger listings within Sri Lanka. Tulloch was of the view that a prototypical good company would be one with a diverse shareholder base.
He was not averse to a large family holding so long as that holding was not over a majority and that there was a significant chunk held by private equity that would keep the company on the right track.
Tulloch noted that the IMF had made mistakes in their approach to the Asian financial crisis and that they may repeat themselves in Sri Lanka. Tulloch was of the view that it ‘was difficult to lose money so long as you invested in good companies, with good fundamentals, at a fair price.’
Chairman: Asia at Abrdn PLC Hugh Young, which is another leading hedge fund in the region, noted that conglomerates globally tended to trade at discounts to the individual businesses within the group. He was of the view that old conglomerates were good entities as they had established cultures with a composition of entities that would be able to survive.
Young highlighted that new conglomerates or ones that were trying to expand rapidly were problematic as they may not have the expertise required to enter the industries into which they are venturing. Young highlighted that though he preferred Sri Lanka to regional markets of Pakistan and Bangladesh this was not the case with International Hedge funds which prefer benchmarks and a larger pool of companies from which to select.
Young hailed the management of John Keells Holdings which he opined was well-established firm with a strong corporate culture. Sri Lanka was praised for opening up earlier than other frontier markets in the 1990s. Young noted that it was problematic for the Sri Lankan index to have the consistently largest entity being the Ceylon Tobacco Company for an ESG investing perspective. Young also noted that the politics of the region were different to what he was used to in the west.
Young called on the country to follow the model of Singapore where judges and civil servants are paid more and the country is more open for investment. Young was critical of the country watering down moves to split the Chairman and CEO roles. Young noted that when the SEC tried to bring in the regulations the corporate sector got agitated and watered it down and the country has since gone down an independent director route.
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